Thursday , 20 September 2018

Here Are the Top 5 “Breakout” Stocks (out of an universe of 7,875)

Picking breakout stocks is one of the most favored methods for those utilizing an active investing approach since this strategy promises superlative returns. [Using specific screening parameters Zacks identified 9 prospective candidates out of an universe of 7875 and this article highlights the top 5 stocks that meet their criteria.] 

The original article has been edited here for length (…) and clarity ([ ]).

This method involves zeroing in on those stocks whose prices are varying within a narrow band.

  • If the price of the stock falls below this channel, it could be the best time to sell off this stock.
  • If the price of the stock is about to break above this trading band then the stock offers the prospect of impressive gains.

Identifying Prospective Candidates

In order to identify breakout stocks, you must first determine their resistance and support levels.

  • A resistance level is a barrier which must be broken so as to be identified as a breakout stock.
  • A support level is the floor for the stock’s movement.

At the breakout level, the demand for the stock has peaked, making it a natural choice for traders. On the other hand, when a stock hits the support floor, traders are eager to offload it. In order to spot breakout stocks, you would have to see which of these are on the brink of breaking the resistance barrier or those that have just breached this level.

Checking Whether It’s for Real

Stocks that have breached their resistance levels should ideally be in high demand among traders but the test of whether this is a genuine breakout is when they go on to attain higher prices and the old barrier becomes a new support. This is why it is important to determine whether a long-term price trend is about to emerge.

Only a study of long-term trends can determine whether the existing trading channel has been breached effectively. This indicates the strength of the support or resistance levels. If you can identify the effective channel for a stock, picking it even at a not-so-reasonable price would give you significant returns.

Screening Parameters

  1. Percentage price change over four weeks between 10% and 20% (Stocks which are showing considerable price increases, but whose gains are not excessive.)
  2. Current Price /52-Week High greater than or equal to 0.9 (Stocks which are trading 90% close to their 52-week highs.)
  3. Zacks Rank less than or equal to #2
    (Only Strong Buy and Buy-rated stocks can get through.)
  4. Beta for 60 months less than or equal to 2 
    (Stocks which move by a greater degree than the broader market but within a reasonable limit.)
  5. Current price less than or equal to $20 (Stocks which are reasonably priced.)

Here are the top 5 stocks that meet the above criteria: Each of these has a Zacks Rank #1 (Strong Buy).

  1. Johnson Outdoors Inc. (JOUT) is a designer, marketer, and manufacturer of watercraft, marine electronics, diving and outdoor equipment. Johnson Outdoors’ average EPS surprise for the last four quarters is more than 100%.
  2. Weight Watchers International, Inc. (WTW) is the largest provider of weight control programs in the world. Weight Watchers’ average EPS surprise for the last four quarters is more than 100%.
  3. FMC Corp. (FMC) is a diversified chemical company that serves agricultural, industrial, environmental and consumer markets across the globe. FMC Corp’s average EPS surprise for the last four quarters is 8.2%.
  4. Momo Inc. (MOMO) is the operator of a mobile-based social networking platform primarily in the Peoples Republic of China. Momo Inc.’s average EPS surprise for the last four quarters is 17.2%.
  5. SolarEdge Technologies, Inc. (SEDG) is a designer, seller and developer of direct current optimized inverter systems for solar photovoltaic installations. SolarEdge’s average EPS surprise for the last four quarters is 29.1%.
Related Articles From the munKNEE Vault:

This article identifies the 10 lowest PEmg (price/normalized earnings) companies reviewed by ModernGraham. Each company has been determined to be undervalued or fairly valued and suitable for the Defensive Investor according to the ModernGraham approach.

2. Price-to-Book Ratio Valuations: 6 Stocks That Met Our Screening Parameters

Value investing offers an opportunity to enter the market and grab stocks that have otherwise been overlooked by the majority of investors and are thus trading at cheap multiples. Although price to earnings (P/E) and price to sales (P/S) valuation tools are more commonly used for stock selection, the price-to-book ratio (P/B ratio) is also an easy-to-use metric for identifying bargain stocks with high-growth prospects. This article identifies 6 of the 10 stocks that met or surpassed our screening parameters.

3. 7 GARP Stocks Offering Solid Returns In the Near Term

A Growth At a Reasonable Price (GARP) strategy helps investors gain exposure to stocks that have impressive prospects and are trading at a discount. Using the GARP principle, we have run a screen to identify 7 stocks that are likely to offer solid returns in the near term.

4. Best 4 Defensive Stock Sectors & Best Stock In Each

Morgan Stanley has been busy recently. A team of over 30 analysts has just put together a list of the best defensive sectors, based on almost 25 years of market data. This article delves into four sector stock picks highlighted by the firm – stocks that can still deliver even in times of volatility or slowing returns – and why these four stocks also have the backing of the Street in general. Let’s take a closer look now.

5. Expect 15% – 28% Annual Returns From These 10 Dividend Achievers

Investors looking for high-quality businesses should consider dividend growth stocks. The beauty of strong dividend growth companies is that they pay their investors rising streams of dividend income, regardless of the direction the market is going. This article will discuss the top 10 Dividend Achievers, ranked according to their expected returns.

6. These 5 Consumer Discretionary ETFs Should Benefit From Record High Consumer Confidence

The confidence level among Americans reached an all-time high in April, suggesting strong economic growth in the coming period…With rising consumer confidence it is expected that consumer discretionary ETFs will perform well. Investors who intend to benefit from this sector should focus on the ETFs mentioned below.

7. 5 Low Price-To-Book Value Stocks To Buy Now

In value analysis the underrated price-to-book ratio (P/B ratio) is an easy-to-use valuation tool for identifying low-priced stocks with exceptional returns. Here are 5 such stocks you should seriously consider buying now.

8. 4 Stocks With BIG Growth Prospects

Even in the current climate, savvy investors can still find promising stocks with big growth prospects…The stocks covered below all boast sales growth of over 20%, based on the Street’s 2019 estimates. These are the stocks to turn to if GDP growth begins to slow.

9. These 5 Top Dividend Stocks All Share A ‘Strong Buy’ Rating

Dividend stocks are a…[great] way to ride out the choppy markets right now [and we have identified 5 such stocks that all] share a ‘Strong Buy’ rating from the Street using TipRanks’ powerful stock screener so, without further ado, let’s dive in and take a closer look at what the Street’s top analysts are saying about these five stocks right now:

10. These 10 “Graham Number” Stocks Should Be Great Investments

The following 10 companies have demonstrated strong financial positions through passing the rigorous requirements of the ModernGraham Investor and show potential for capital growth based on their current price in relation to intrinsic value. As such, these Graham Number stocks may be a great investment if they prove to be suitable for your portfolio after your own additional research.

11. The Solid Earnings Growth Of These 5 Stocks Should Result In Stupendous Returns

Earnings estimates embody analysts’ opinions of factors such as sales growth, product demand, competitive industry environment, profit margins and cost control. Thus, earnings estimates serve as a valuable tool while taking investment decisions. Earnings estimates also help analysts assess the cash flow to determine the fair value of a firm.

Support our work: like us on Facebook or share this article with a friend. munKNEE.com Voted the internet’s “most unique” financial site! (Here’s why)
Don’t forget! For the latest – and most informative – financial articles sign up (in the top right corner) for your FREE tri-weekly Market Intelligence Report newsletter (see sample here)